The White House reportedly looked into demoting the Federal Reserve chief

Marco Green
June 19, 2019

President Donald Trump on Tuesday kept up pressure on the head of the Federal Reserve to lower interest rates, following a report that White House lawyers earlier this year explored whether they could legally strip Jerome Powell of the Fed chairmanship. But the Fed, which faces frequent attacks from Trump for not being more accommodating to his economic agenda, has hinted for the second time that it won't back down easily. His four-year term as chairman lasts until 2022.

Powell also waded into the debate in March during an interview on "60 Minutes". Trump, meanwhile, officially launched his re-election bid on Tuesday, a campaign in which he'll ask voters to keep him in the White House largely on the strength of the USA economy. Such a move would be unprecedented in the Fed's 100-year history.

"They are going to be making an announcement pretty soon, so we'll see what happens", Trump told reporters.

Some legal scholars believe Trump couldn't remove Powell as chairman simply because he doesn't agree with his monetary policy. "They'll act on their own time, in their own way", Kudlow said. But it was unclear whether that move would have been legal, and Powell has said he would not resign if the president asked him to. The central bank has said that uncertainties have increased. Earlier Tuesday, he criticized European Central Bank President Mario Draghi for signaling a rate cut and pushing down the value of the euro.

"I want to be given a level playing field, and so far I haven't been", Trump told reporters.

It's also important to note that Powell alone hasn't been setting the country's monetary policy: The 10 voting members of the Federal Open Markets Committee all agreed unanimously to raise interest rates four times past year.

Robert C. Hockett, a law professor at Cornell Law School in Ithaca, New York, whose research includes monetary law and economics, said the White House likely zeroed in on the possibility of demoting Powell because it was unlikely that disagreements about policy could be considered cause for removal.

Trump has called out the Fed for undercutting his economic and trade policies by keeping policy too tight, complaining that under Powell, the Fed has gone "crazy".

While Trump still regularly expresses his displeasure with the Fed in tweets, talk of removing Powell has subsided.

Powell was picked by Trump for the job to replace Janet Yellen.

Under the Federal Reserve Act, which was signed into law in 1913, the president has the power to appoint seven members to the Fed's board of governors, with the approval of the Senate.

"Even if Trump could "demote" Powell, the FOMC could nevertheless vote to keep him on as FOMC chair, thereby neutralizing Trump's move", Hockett said.

-With assistance from Austin Weinstein and Laura Litvan.

"In doing that calculus, I think Jay would run to ground and decide it's just not worth the fight", he said.

Other reports by Click Lancashire

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